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Sinclair Oil Corporation v. Levien Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: A minority shareholder sued Sinclair (parent) for harming Sinven (subsidiary). The court applied the business judgment rule to dividend and corporate opportunity claims (no self-dealing) but intrinsic fairness to a contract breach claim (self-dealing found), clarifying standards for parent-subsidiary transactions.
Legal Significance: This case established that the intrinsic fairness standard applies to parent-subsidiary transactions only when the parent engages in self-dealing, receiving a benefit to the exclusion and detriment of minority shareholders. Otherwise, the business judgment rule governs.
Sinclair Oil Corporation v. Levien Law School Study Guide
Use this case brief structure for your own legal analysis. Focus on the IRAC methodology to excel in law school exams and cold calls.
Case Facts & Court Holding
Key Facts & Case Background
Sinclair Oil Corporation (Sinclair) owned 97% of Sinclair Venezuelan Oil Company (Sinven) and nominated all of Sinven’s directors, who were found to be non-independent. Plaintiff Levien, a minority shareholder of Sinven, initiated a derivative action. Levien alleged three primary harms: (1) Sinclair caused Sinven to pay excessive dividends (totaling $108 million, $38 million over earnings from 1960-1966) to satisfy Sinclair’s own cash needs, thereby hindering Sinven’s growth, although these dividends complied with 8 Del.C. § 170; (2) Sinclair denied Sinven corporate opportunities for industrial development by pursuing them through other subsidiaries; and (3) Sinclair caused Sinven not to enforce a contract with Sinclair International Oil Company (International), another wholly-owned Sinclair subsidiary. Under this contract, Sinven was to sell its crude oil to International. Levien claimed International breached the contract by making late payments and failing to purchase minimum required quantities of oil. The Court of Chancery had applied the intrinsic fairness standard to all claims, finding Sinclair liable.
Court Holding & Legal Precedent
Issue: Under what circumstances does the intrinsic fairness standard, rather than the business judgment rule, govern the conduct of a parent corporation in transactions with its dominated subsidiary when a breach of fiduciary duty is alleged?
The Supreme Court of Delaware held that the business judgment rule applied Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ips
IRAC Legal Analysis
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IRAC (Issue, Rule, Analysis, Conclusion) is the exact format professors want to see in your exam answers. Our exclusive Flash-to-Full briefs combine holding, analysis, and rule statements formatted to match what A+ students produce in exams. These structured briefs help reinforce the essential legal reasoning patterns expected in law school.
Legal Issue
Under what circumstances does the intrinsic fairness standard, rather than the business judgment rule, govern the conduct of a parent corporation in transactions with its dominated subsidiary when a breach of fiduciary duty is alleged?
Conclusion
Sinclair v. Levien is a foundational Delaware corporate law case that clarifies Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea com
Legal Rule
A parent corporation owes a fiduciary duty to its subsidiary. The intrinsic Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex
Legal Analysis
The Court meticulously distinguished between transactions involving self-dealing and those that do Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labo
Flash-to-Full Case Opinions
Flash Summary
- The intrinsic fairness test applies to a parent-subsidiary transaction only when